U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2010

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the Transition Period From ____to _____

Commission File Number: 001-10559

CHINA LOGISTICS, INC.

NEVADA	65-1021346
(State or other jurisdiction of	(IRS Employer identification No.)
incorporation or organization)

Suite 910, Yi An Plaza, 33 Jian She Liu Road

Guangzou, P.R.China 510000

(Address of principal executive offices)

(8629) 8436-8561

(Issuer's telephone number)

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

Yes [ ] No [x]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 if Regulation S-K (229.405 of this Chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-Q or any amendments to this Form 10-Q.

Yes [ ] No [x]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)
Accelerated filer	¨
Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act).

Yes [ ] No [x]

Number of shares of common stock outstanding as of November 15, 2010: 54,786,726

Number of shares of preferred stock outstanding as of November 15, 2010: 3,295,000

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

INDEX TO FORM 10-Q
	Page No.

PART I

Item 1. Financial Statements	3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3. Quantitative and Qualitative Disclosures About Market Risk	11

Item 4. Controls and Procedures	11

Item 4T. Controls and Procedures	11

PART II

Item 1. Legal Proceedings	13

Item 1A. Risk Factors	13

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 3. Defaults Upon Senior Securities	13

Item 4. Removed and Reserved	13

Item 5. Other Information	13

Item 6. Exhibits	13

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CHINA LOGISTICS, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

CHINA LOGISTICS, INC. PAGE

Unaudited Condensed Consolidated Balance Sheet 4

Unaudited Condensed Consolidated Statement of Operations 5

Unaudited Condensed Consolidated Statement of Cash Flows 6

Notes to Unaudited Condensed Consolidated Financial Statements 7

China Logistics, Inc and Subsidiary
Unaudited Condensed Consolidated Balance Sheets
As of September 30, 2010 and December 31, 2009

ASSETS
	September 30, 2010			December 31, 2009
				(Audited)
CURRENT ASSETS
Cash and cash equivalents	$	2,212,203		$	1,223,829
Accounts receivable,trade		1,359,715			4,418,594
Other receivables		285,250			146,524
Inventory		474,634			3,844,655
Prepaid expenses		77,495			290,903
Prepaid VAT tax		18,195			483,068
TOTAL CURRNET ASSETS	$	4,427,491		$	10,407,573


FIXED ASSETS
Property, plant, and equipment	$	78,510		$	47,319
Accumulated depreciation		(17,004	)		(12,082	)
NET FIXED ASSETS	$	61,506		$	35,237


TOTAL ASSETS	$	4,488,997		$	10,442,810

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	2,399,236		$	8,690,450
Other payables		62,623			114,355
Other payables-related party		9,574			36,816
Received in advance		810,945			335,076
Tax payable		-			9,422
TOTAL CURRENT LIABILITIES	$	3,282,377		$	9,186,119

TOTAL LIABILITIES	$	3,282,377		$	9,186,119

COMMITMENTS AND CONTINGENCIES
Redeemable preferred stock (par value $.01, 5,000,000 Shares	$	32,950		$	32,950
authorized, 3,295,000 shares issued and outstanding as of
June 30, 2010 and December 31, 2009


STOCKHOLDERS' EQUITY
Common stock (par value $.0001, 250,000,000 shares authorized,		5,478			5,478
54,787,026 shares issued and outstanding as of
June 30, 2010 and December 31, 2009
Additional paid in capital		2,146,261			2,146,261
Statutory reserves		850			850
Accumulated other comprehensive income		163,367			139,213
Retained earnings (deficit)		(1,142,286	)		(1,068,060	)
TOTAL STOCKHOLDERS' EQUITY	$	1,173,670		$	1,223,742

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,488,997		$	10,442,810

The accompanying notes are an integral part of these financial statements.

China Logistics, Inc and Subsidiary
Unaudited Condensed Consolidated Statements of Operations
For the Three and Nine Months ended September 30, 2010 and 2009

	For the Three months ended						For the Nine months ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009

Revenues
Product	$	955,894		$	7,578,212		$	6,169,363		$	9,390,338
Services		248,576			115,364			817,787			373,685
		1,204,470			7,693,576			6,987,150			9,764,023

Cost of revenues		1,007,140			7,330,202			6,164,031			9,127,224
Gross profits		197,330			363,374			823,119			636,799


Operating expenses
Selling General and Administrative	$	233,256		$	299,240		$	863,527		$	582,946
Stock based compensation					1,026,000						1,026,000
Income (Loss) from Operations		(35,926	)		(961,866	)		(40,407	)		(972,147	)

Other income (expenses)
Finance income (costs)		(8,888	)		(33,743	)		(56,581	)		(35,694	)
(loss) on extinguishment of convertible debt					(126,220	)					(126,220	)
Non-operating income (expense)		29,129			849			30,594			849
Total other income (loss)		20,241			(159,114	)		(25,987	)		(161,065	)

Income (loss) from Operations		(15,685	)		(1,120,980	)		(66,395	)		(1,133,212	)

Income taxes		1,987			7,399			7,831			12,821

Net Income (Loss)		(17,672	)		(1,128,379	)		(74,226	)		(1,146,033	)

Other comprehensive income (loss)
Foreign currency translation gain (loss)		17,097			505			24,154			(1,022	)

Comprehensive income (loss)	$	(575	)	$	(1,127,874	)	$	(50,072	)	$	(1,147,055	)

Net loss per common share
Basic & diluted	$	(0.00)		$	(0.02)		$	(0.00)		$	(0.04)



Weighted average common shares outstanding
Basic & diluted		54,787,026			54,130,959			54,787,026			29,503,300



The accompanying notes are an integral part of the financial statements

China Logistics, Inc and Subsidiary
Unaudited Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended June 30, 2010 and 2009

	For the Nine months ended
	September 30, 2010			September 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(74,226	)	$	(1,146,033	)
Common stock issued for services rendered and expensed					1,026,000
Common stock issued for extinguishment of debt					126,220
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities:
Depreciation		4,620			2,760
Accounts receivable ,trade		3,093,704			1,153,105
Other receivable		(133,828	)		(126,725	)
Prepaid expense		215,514			175,391
Inventory		3,389,279			318,342
Accounts payable		(6,355,420	)		(750,840	)
Tax payable		457,195			(44,821	)
Other payable		(52,327	)		129,043
Others		462,195			267,112
NET CASH (USED IN) OPERATING ACTIVITIES		1,006,706			1,129,554

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase of PPE					(512,278	)
Purchase of property, plant, and equipment		(29,821	)		(25,394	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(29,821	)		(537,672	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) of due to shareholders'		(27,505	)		(462,116	)
Due from shareholders'
Statutory reserves
Capital contribution
NET CASH PROVIDED BY FINANCING ACTIVITIES		(27,505	)		(462,116	)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT		38,993			(406	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		988,373			129,360

CASH AND CASH EQUIVALENTS:
Beginning of period		1,223,829			531,313
End of period	$	2,212,203		$	660,673

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	32,251		$	6,739
Cash paid for interest	$	4,252		$	-

Non-cash transactions during the period
Common stock issued for services rendered and expensed	$	-		$	1,026,000
Common stock issued for extinguishment of debt	$	-		$	126,220

The accompanying notes are an integral part of these financial statements.

CHINA LOGISTICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010

(UNAUDITED)

1.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the Company’s annual audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the years ended December 31, 2009 and 2008 thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2009.

2.	ORGANIZATION AND BUSINESS BACKGROUND

China Logistics Inc. (the “Company” or “CLGZ”) was incorporated in the State of Nevada on December 23, 1988, formerly known as China International Tourism Holdings, Limited, Dark Dynamite, Inc., NCI Holdings, Inc., Vector Holding, Inc., and prior to June 26, 2002, Vector Aeromotive Corporation. The name change from China International Tourism Holdings, Limited to China Logistics Inc. took effective on August 10, 2009.

On February 18, 2009, a Plan of Exchange (the “Exchange”) was executed between and among the Company, Chengkai Logistics Co Ltd., a corporation organized under the laws of the Peoples’ Republic of China (“Chengkai”), and the shareholders of Chengkai (“Chengkai Shareholders”). The Exchange was consummated on May 19, 2009, pursuant to which 50,000,000 (after taking into account the Reverse Split) shares of the Company’s common stock were issued to the stockholder of Chengkai. Thereafter, Chengkai became the Company’s wholly-owned subsidiary.

Simultaneously, pursuant to a Purchase Agreement, the former president of the Company tendered a cash purchase price of $100 and assumed certain liabilities in exchange for all outstanding shares of Shanxi Kai Da Lv You Gu Wen Xian Gong Si, the Company’s wholly-owned subsidiary organized under the laws of the Peoples’ Republic of China ("Kai Da"). As a result of the transactions consummated at the closing, the purchase and issuance gave the former president a 'controlling interest' in Kai Da, and Kai Da was no longer a wholly-owned subsidiary of the Company.

The Exchange between the Company and Chengkai have been respectively accounted for as reverse acquisition and recapitalization of the Company and Chengkai whereby Chengkai is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer) under the Exchange. The condensed consolidated financial statements are in substance those of Chengkai, with the assets and liabilities, and revenues and expenses, of the Company being included effective from the respective consummation dates of the Exchange.

CLGZ and its wholly-owned subsidiary Chengkai are hereafter referred to as (the “Company”).

The Company is a logistic company specializing in logistical services for car manufacturers, car components, food assortments, chemicals, paper, and machinery in China. The services cover various aspects of transportation management, including logistical planning, import and export management, electronic customs declaration systems, supply chain planning, transporting products from ports to warehouses or vice versa, organization of transportation, and storage and distribution of products.

The Company’s customers include international companies and domestic enterprises in China from various industries. The Company’s customer base has been increasing at a rapid pace, especially within the Food Industry, Paper Industry, Mechanical Industry, Garment Industry, Furniture Industry and Daily Commodity Industry.

3.	RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements and Disclosures

(Accounting Standards Update (“ASU”) 2010-06)

In January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires new disclosures regarding transfers in and out of the Level 1 and 2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for Level 2 and 3 fair value measurements. ASU 2010-06 also includes conforming amendments to employers’ disclosures about postretirement benefit plan assets. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this statement is not expected to have a material impact on our consolidated financial position or results of operation.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

CHINA LOGISTICS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010

(UNAUDITED)

4.	SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the nine months ended September 30, 2010 and 2009 are summarized as follows:

Cash paid during the nine months ended September 30, 2010 and 2009 for interest and income taxes:

For the nine months ended September 30,

2010 2009

Income Taxes $32,251 $6,739

Interest $ 4,252 $ -0-

5.	ACCOUNTS RECEIVABLE, NET

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, management has determined that the allowances for doubtful accounts of $22,625 and $22,204 were required as of September 30, 2010 and December 31, 2009, respectively.

	September 30, 2010		December 31, 2009

Accounts receivable, gross	$	1,382,340	$	4,440,798

Less: allowance for doubtful accounts		(22,625)		(22,204)
Accounts receivable, net	$	1,359,715	$	4,418,594

6.	INVENTORIES

	September 30, 2010		December 31, 2009

Inventories	$	474,634	$	3,844,655

There was no provision for obsolete inventories recorded by the Company as of September 30, 2010 and December 31, 2009, respectively.

7.	RECEIVED IN ADVANCE

As of September 30, 2010, the Company had customer deposits of $810,945, representing payments received for orders not yet shipped. The Company expects to ship these orders in the fourth quarter of 2010.

8.	CONCENTRATION AND RISK

(a)	Major customers

For the nine months ended September 30, 2010 and 2009, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues and purchases were derived from customers and vendors located in the PRC.

The Company had two customers that comprised 81% of net revenue for the nine months ended September 30, 2010, and one customer that individually comprised 86% of net revenue for the nine months ended September 30, 2009.

As of September 30, 2010

Customers		Revenues					Accounts Receivable
Customer A		$	4,387,190	63	%		$	1,087,110

Customer B			1,259,525	18				-

	Total:	$	5,646,715	81	%	Total:	$	1,087,110

As of September 30, 2009

Customers		Revenues					Accounts Receivable
Customer A		$	8,422,291	86	%		$	6,564,431

	Total:	$	8,422,291	86	%	Total:	$	6,564,431

(b) Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition, but does not require collateral to support such receivables.

The Company's operations are conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

9.	GOING CONCERN UNCERTAINTIES

These consolidated financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As of September 30, 2010, the Company had an accumulated deficit of $1,142,286. Management has taken certain action and continues to implement changes designed to improve the Company’s financial results and operating cash flows. The actions involve certain cost-saving initiatives and growing strategies, including (a) reductions in headcount and corporate overhead expenses; and (b) expansion into new market. Management believes that these actions will enable the Company to improve future profitability and cash flow in its continuing operations through December 31, 2010. As a result, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of the Company’s ability to continue as a going concern.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management’s Discussion and Analysis contains various “forward looking statements” within regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Management’s Discussion and Analysis of Results of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements included herein.

HISTORY

China Logistics Inc. (the “Company” or “CLGZ”) was incorporated in the State of Nevada on December 23, 1988, formerly known as China International Tourism Holdings, Ltd., Dark Dynamite, Inc., NCI Holdings, Inc., Vector Holding, Inc., and prior to June 26, 2002, Vector Aeromotive Corporation.

On February 17, 2009, the Company entered into a transfer & change of control agreement with Ms. Wanwen Su (“Ms. Su”) and Mr. Ming Lei (“Mr. Lei”), pursuant to which, Ms. Su acquired from Mr. Lei 2,636,000 shares of preferred stock of the Company and received a “controlling interest” in the Company.

On February 18, 2009, our Board of Directors adopted a resolution approving a two hundred to one reverse split of our issued and outstanding Common Stock. The reverse split combined our outstanding Common Stock on the basis of 200 outstanding shares being changed to 1 outstanding share. Each shareholder’s percentage ownership in the Company (and relative voting power) remained essentially unchanged as a result of the reverse split. The reverse split was effective on April 3, 2009.

On April 23, 2009, China Logistics, Inc. (F/K/A China International Tourism Holdings, Ltd.), entered into an Agreement (the “Agreement”) between and among the Registrant, Shanxi Kai Da Lv You Gu Wen Xian Gong Si, a corporation organized under the laws of the Peoples’ Republic of China (“Kai Da”), and Mr. Lei Ming, an individual (“Buyer”).

Pursuant to the terms of the Agreement, the Buyer acquired 100% of the total assets of $407,616 and total liabilities of $481,275 (collectively “Kai Da Assets and Liabilities) from the Registrant for the payment of good and valuable consideration of $100.00 (the “Purchase Price”). As a result of the transactions consummated at the closing, the purchase and issuance gave the former president a 'controlling interest' in Kai Da, and Kai Da was no longer a wholly-owned subsidiary of the Company.

On August 10, 2009, the Company changed its corporate name from China International Tourism Holdings, Ltd. to China Logistics Inc. and believed that the new corporate name would provide a more accurate description of the Company’s current operations and be consistent with the Company’s marketing efforts in the logistic industry. Accordingly, the ticker symbol of the Company’s Common Stock was changed to “CLGZ”.

BUSINESS DESCRIPTION OF THE ISSUER

Since the reverse merger with Chengkai was consummated, we have continued operations of Chengkai, a logistic company specializing in logistical services for car manufacturers, car components, food assortments, chemicals, paper, and machinery in China.

Chengkai was incorporated in the PRC on October 19, 2004 as a limited liability company, with registered capital of approximately $1,200,000 as of December 31, 2007. Chengkai is located in Guangzhou City, one of the largest commercial bases in China, and a booming transportation hub with easy access to railroad, highway, and rivers. Chengkai has two logistic centers located in Baiyun Airport and the Huangpu Xingang Port in Guangzhou City, Guangdong Province, China.

Chengkai specializes in logistical services for car manufacturers, car components, food assortments, chemicals, paper, and machinery in China. The services cover various aspects of transportation management, including logistical planning, import and export management, electronic customs declaration systems, supply chain planning, transporting products from ports to warehouses or vice versa, organization of transportation, and storage and distribution of products.

Chengkai’s customers include international companies and domestic enterprises in China from various industries. Their clients from the automobile industry include Rolls Royce Automobile Accessories, Mercedes Benz Automobile Accessories, Peugeot Automobile Accessories, BMW Automobile Accessories, and Nissan Automobile Accessories. Their electronic industries clients include IBM Electronics and Creator Corporation China. Chengkai’s chemical industries clients include Korean LG Chemical Engineering Company, French Rhodia Chemical Company, Spanish Caster Rubber Company, and Korean Dongsung Chemical Co., Ltd. Chengkai’s customer base has been increasing at a rapid pace, especially within the Food Industry, Paper Industry, Mechanical Industry, Garment Industry, Furniture Industry and Daily Commodity Industry.

CHENGKAI SERVICES

International Trade and Import & Export Management

Import & export trade, domestic distribution and purchasing solutions are provided by Chengkai to reach a win-win business solution. Through several years of practice of commercial trading in China, Chengkai has accumulated resourceful working experiences and gained close partnerships with financial institutions. These financial institutions help us combine our business procedures and financial status to provide value-added and win-win business solutions for our clients.

	· Purchasing process
	· Services orienting towards foreign purchasers

	· Services for domestic manufacturing purchasers
	· Distribution process

	· Efficient import & export customs declaration
	· Supply-chain financing service

Some international purchasers, who need to purchase their commodities and balance the account among several districts within the country, will more or less be restricted by the local policies such as the leverage of foreign exchange, value-added tax, and import & export trading rights. In order to solve such inadequacies, Chengkai strives to improve their clients’ working efficiency, and help minimize costs. We minimize costs by integrating manufacturing resources such as purchasing, R&D and manufacturers. We center on a specific or diversified products that highlight core business. We also incorporate management of materials, information and financing. We commit to a more reliable and efficient supply-chain partnership with manufacturers and transnational purchasers.

Customs Declaration

Chengkai provides customs affairs trusteeship, consultations, and software application solutions on customs network supervision.

Customs affairs have become very complicated in China given the supervision on processing trade, factors concerning China’s policies, and the local implementation and the conflicts that might occur within enterprises. We, as the third party that gets involved in between the government and enterprises, strive to keep sound relationships with governmental departments. With the support of some relevant departments, and our experiences and specialty in dealing with customs affairs, we can provide a comprehensive backup service for our clients.

Specialties:

In regards to the supervision policies on processing trade, we provide declaration management strategies and computerized system for enterprises engaged in processing trade, so as to improve their management level, optimize their declaration procedures, and control their declaration risks.

	· We automatically collect data in the manufacturing management database.
	· We safely connect the manufacturing management system and accounting management system of the enterprises.

	· We develop customized planning that corresponds to each enterprise.
	· We monitors and analyzes capital flow.

Warehousing and Transportation

Chengkai provides diversified logistics solutions.

In order to construct an efficient logistics system, Chengkai has established solutions with our co-partners, based on the needs of our clients. Through effective integration of logistics, we provide various logistics solution for our clients. Our experienced consultants diagnose and analyze elements that make up of the whole supply-chain to help customize a logistic system that shortens the time of order to the time of delivery.

Specialties:

	· Production Logistics
	· Sales Logistics

· International Logistics

Production Logistics

Our client’s competitiveness is measured through the enterprise’s capacity to improve its production efficiency, lower its comprehensive cost and practice expenditures, all of which are realized through the optimization and improvement of production logistics system. In-time supply and keeping appropriate inventory are of the most concerned by manufacturers. We, together with other enterprises, have worked for many years in establishing an efficient logistics system in line with our client’s needs.

	· Production accessories and raw material supply
	· Vendor managed inventory (VMI :Vendor Managed Inventory)

	· Land transportation
	· In-factory logistics

Sales Logistics

Chengkai provides managerial operations as well as delivery service for product agents, dealers, and department stores.

	· National network transportation
	· Management and operation in the logistics center

	· 3C digital product logistics
	· Quality inspection of clothing and textile goods

International Logistics

Through our talented staff and reliable partnerships, Chengkai provides international cargo transportation that supports business expansion efforts of clients.

· International Logistics Business

RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)

Sales

We had revenues of $1,204,470 was the three months ended September 30, 2010, of which $955,894 was from the sales of products and $248,576 from services rendered, a decrease of $6,489,706 compared to revenues of $7,693,576 for the same period ended September 30, 2009, which consisted of $7,578,212 from sales of products and $115,364 from services rendered. The dramatic decrease in revenues during the third quarter of 2010 was due primarily to the drop in our orders from our major customer, Shanghai Xin Dian. We believe the reduction is temporary and the order quantities will be back to normal due to our positive working relationship with Shanghai Xin Dian.

For the nine months ended September 30, 2010 and 2009, we had revenues of $6,987,150 and $9,764,023, respectively, of which $6,169,363 from sales of products and $817,787 from services rendered during the nine months ended September 30, 2010, compared to $9,390,338 from sales of products and $373,685 from services rendered for the same period ended September 30, 2009.

Our revenues were derived from logistic services and import / export business. As discussed in our footnotes to our consolidated financial statements, we are bearing the risk of customer concentration. We significantly rely on the orders from one or two major customers. If the orders from our major customers decrease, our revenues will be significantly adversely affected.

Income / Loss

We had net loss of $17,672 and $74,226 for the three and nine months ended September 30, 2010, respectively, compared to net loss of $1,128,379 and $1,146,033 for the three and nine months ended September 30, 2009, respectively. The net loss during the three and nine months ended September 30, 2010 was due primarily to insufficient gross profit to cover the increasing selling, general and administrative expenses. The significant amount in operating expenses during the three and nine months ended September 30, 2009 were due primarily to the non-cash consulting expenses, which were $1,026,000 as a result of the issuance of 3,800,000 shares of common stock for the services rendered in 2008 and 2009. The shares were not issued until the third quarter of 2009, using the fair value of our common stock on the grant date, at a market quoted price of $.27.

Expenses

We had operating expenses of $233,256 and $863,526 for the three and nine months ended September 30, 2010, respectively, due to selling, general and administrative activities, compared to the selling, general and administrative expenses of $299,240 and $582,946 for the comparative periods ended September 30, 2009. The decrease by $65,984 for the three months ended September 30, 2010 was due to the decrease in transportation cost as a result of the decreasing orders. The increase by $280,580 for the nine months ended September 30, 2010 was due primarily to the increase in transportation cost. In addition, there were non-cash consulting expenses of $1,026,000 during the three and nine months ended September 30, 2009, which was a result of the issuance of 3,800,000 shares of common stock for the services rendered in 2008 and 2009. The shares were not issued until the third quarter of 2009, using the fair value of our common stock on the grant date, at a market quoted price of $.27.

Cost of Revenues

We had $1,007,140 and $6,164,031 in cost of revenues, or 83.62% and 88.22% of revenues, during the three and nine months ended September 30, 2010, respectively, compared to cost of revenues of $7,330,202 and $9,127,224, or 95.28% and 93.48% of revenues, during the comparable periods ended September 30, 2009. Cost of sales as a percentage of sales was high in general determined by our business model as a logistic services provider for import/export business. The intensive competition in logistic industry as a result of globalization restricts the growth in our gross margin.

Impact of Inflation

We believe that inflation has had a negligible effect on operations during this period. We believe that we can offset inflationary increases in the cost of sales by increasing sales and improving operating efficiencies.

Liquidity and Capital Resources

Cash flows provided by operating activities were $1,006,706 and $1,129,554 during the nine months ended September 30, 2010 and 2009, respectively. Positive cash flows from operations during the nine months ended September 30, 2010 were due primarily to the decrease in accounts receivable and inventory in the amount of $3,093,704 and $3,389,279, respectively, partially offset by the decrease in accounts payable in the amount of $6,355,420. Positive cash flows from operation during the nine months ended September 30, 2009 were due primarily to the effective collection of accounts receivable in the amount of $1,153,105, and the decrease in inventory in the amount of $318,342, partially offset by the decrease in accounts payable by $750,840.

Cash flows used in investing activities were $29,821 and $537,672 during the nine months ended September 30, 2010 and 2009, respectively, due primarily to the purchase of property, plant and equipments. In addition, we had short-term investment of $512,278 during the nine months ended September 30, 2009.

Cash flows used in financing activities were $27,505 and $462,116 for the nine months ended September 30, 2010 and 2009, respectively. The negative cash flows in both periods were due to the repayments to a shareholder loan.

Overall, we have funded our cash needs from inception through September 30, 2010 with a series of debt and equity transactions, primarily with related parties. If we are unable to receive additional cash from our related parties, we may need to rely on financing from outside sources through debt or equity transactions. Our related parties are under no legal obligation to provide us with capital infusions. Failure to obtain such financing could have a material adverse effect on operations and financial condition.

We had cash of $2,212,203 on hand as of September 30, 2010. Currently, we have enough cash to fund our operations through the end of 2010. This is based on current working capital, cash flows from operation and projected revenues. However, if the projected revenues fall short of needed capital we may not be able to sustain our capital needs. We will then need to obtain additional capital through equity or debt financing to sustain operations for an additional year. Our current level of operations would require capital of approximately $700,000 per year starting in 2011. Modifications to our business plans may require additional capital for us to operate. For example, if we are unable to raise additional capital in the future we may need to curtail our number of product offers or limit our marketing efforts to the most profitable geographical areas. This may result in lower revenues and market share for us. In addition, there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.

On a long-term basis, liquidity is dependent on continuation and expansion of operations, receipt of revenues, additional infusions of capital and debt financing. However, there can be no assurance that we will be able to obtain additional equity or debt financing in the future, if at all. If we are unable to raise additional capital, our growth potential will be adversely affected. Additionally, we will have to significantly modify our business plan.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors. Certain officers and directors of the Company have provided personal guarantees to our various lenders as required for the extension of credit to the Company

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MAR KET RISK

Not applicable for a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods. Our Chief Executive Officer and its Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

The Certifying Officers have also concluded, based on their evaluation of our controls and procedures that as of September 30, 2010, our internal controls over financial reporting are effective and provide a reasonable assurance of achieving their objective.

The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 4T. CONTROLS AND PROCEDURES

(a) Conclusions regarding disclosure controls and procedures. Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Exchange Act as of September 30, 2010, and, based on their evaluation, as of the end of such period, the our disclosure controls and procedures were effective as of the end of the period covered by the Quarterly Report,

(b) Management’s Report On Internal Control Over Financial Reporting. It is management’s responsibilities to establish and maintain adequate internal controls over the Company’s financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; and

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management of the issuer; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

As of the end of the period covered by the Quarterly Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting.

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, internal controls over financial reporting were effective as of the end of the period covered by the Report.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Quarterly Report.

(c) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEE DINGS

We may be subject to, from time to time, various legal proceedings relating to claims arising out of our operations in the ordinary course of our business. We are not currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the business, financial condition, or results of operations of the Company.

ITEM 1A. RISK FACTORS

The information to be reported under this item has not changed since the previously filed 10K, for the year ended December 31, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have not had any unregistered sales of equity securities.

ITEM 3. DEFAULTS UPON SENIOR SEC URITIES

We have not had any default upon senior securities.

ITEM 4. REMOVED AND RESERVED

We have not had any submissions of matters to a vote of security holders.

ITEM 5. OTHER INFOR MATION

We do not have any other information to report.

ITEM 6. EXHIBITS

31.1 CEO Certification Pursuant to Section 302

31.2 CFO Certification Pursuant to Section 302 (included in Exhibit 31.1)

32.1 CEO Certification Pursuant to Section 906

32.2 CFO Certification Pursuant to Section 906 (included in Exhibit 32.1)

Reports on Form 8-K

None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CHINA LOGISTICS, INC. (Registrant)

Date: November 15, 2010	By:	/s/ Wanwen Su
		Wanwen Su President, Chief Executive Officer, and Chief Financial Officer

CHINA LOGISTICS INC 10-Q